In recent years, Singapore has emerged as one of the preferred locations for the incorporation of blockchain companies, as well as the fundraising location for their new blockchain ventures via initial coin offerings, otherwise known as ICOs.

Typically, these companies issue their own digital tokens in an ICO and sell them to the early backers of their new project in exchange for cryptocurrencies such as Ethereum or Bitcoin.

Despite of the increased interest in cryptocurrency and ICOs in Singapore, the current legislation in Singapore has yet to be updated to fully address the accounting and tax treatments applicable to crypto-transactions.

Guidance from Singapore’s central bank and financial regulatory authority – Monetary Authority of Singapore (“MAS”)

The MAS has taken the approach of not regulating the cryptocurrencies directly1.  Instead, it focuses on the activities associated with the use of cryptocurrencies and evaluates the risks posed by these activities and comes up with the appropriate regulatory responses. It has issued a guide “A Guide to Digital Token Offering3” in November 2017 to provide general guidance on the application of the Securities and Futures Act (“SFA”) in relation to the offer or issuance of digital tokens in Singapore. The virtual currencies exchanges in Singapore are also regulated by the MAS to combat potential money laundering and terrorist financing risks posed by cryptocurrencies.

The issuance and offering of digital tokens that are not considered capital market product3 under the SFA are not regulated by the MAS and thus prior approval from MAS is not required. Otherwise, approval must be sought from the MAS prior to the commencement of the ICO. The MAS is serious about this and has stopped an unnamed ICO in Singapore in May 2018 as it did not follow the SFA rules and was launched without a MAS-registered prospectus.

In addition, the MAS has clarified that cryptocurrencies are not considered as currency i.e. not legal tender.

Guidance from Singapore’s tax authorities – Inland Revenue Authority of Singapore (“IRAS”)

The IRAS has also issued certain general guidelines on crypto-transactions via their website.

For corporate income tax, the IRAS applies the same assessment basis on income derived by blockchain businesses as brick and mortar businesses: income derived from crypto-transactions will be subject to tax in Singapore if it is a revenue gain accrued or derived in Singapore or received in Singapore from outside Singapore. Hence, gains from activities such as the buying and selling of cryptocurrencies in the ordinary course of business and the mining of cryptocurrencies, if assessed as Singapore-sourced revenue gains, will be subject to tax. On the other hand, if such gains are assessed to be capital in nature, they will not be taxable as Singapore does not levy tax on capital gains.

Taking guidance from the MAS’ ruling that cryptocurrencies are not legal tender, the IRAS advises that the supply of virtual currencies (which includes cryptocurrencies and digital tokens) is a supply of service for Good and Services Tax (“GST”) purposes. In addition, the IRAS has advised that payment for goods or services using virtual currencies is considered as barter trade. Thus, two supplies will be triggered:

  • by the supplier who supplies the goods or services; and
  • by the buyer who pays (i.e. “supplies”) the virtual currencies.

Therefore, a company that pays its supplier using cryptocurrencies will have to charge GST if it is registered for GST.

Tax considerations/ challenges when embarking on ICOs

Blockchain companies that have conducted their ICO or in the process of doing so will often encounter the following challenges. This is because the conventional solutions for “brick and mortar” set-ups may not suit them:

The ICOs are usually undertaken by the ICO issuers to raise funds for the development of their blockchain platform or software. If the tokens are not equity in nature, the ICO issuers will face the unique situation that the proceeds from their fundraising exercise may be exposed to tax as revenue gains.

Singapore’s tax regime is on a territorial basis, thus income accrued in or derived in Singapore will be taxed in Singapore. In addition, income derived from outside Singapore, which are received or deemed received in Singapore, will also be subject to tax. The sourcing of the ICO proceeds remains to be a key issue to be addressed. ICO issuers who attempt to take the foreign income treatment on their ICO proceeds will find it difficult to justify their case effectively as the proceeds bypass the traditional financial institutions. Besides, there is the risk of tax exposure in another country if not sourced in Singapore.

The issuers usually continue to hold the cryptocurrencies raised in their electronic wallets without conversion into fiat currencies as they mainly transact with their suppliers using cryptocurrencies. Conversion of cryptocurrencies into fiat currencies occurs only when their vendors do not accept cryptocurrencies as a mode of payment. The “functional currency” for these companies would be in cryptocurrencies. However, current accounting standards in Singapore do not allow the use of cryptocurrencies as a company’s functional currency for financial reporting purposes as cryptocurrencies are not legal tender. ICO issuers will have to artificially translate all crypto-transactions into fiat currency, such as US Dollar, when reporting their annual financials. This will then result in the challenge of valuing the cryptocurrencies. Companies will then have the grapple with another issue: the volatility and price fluctuation risks of cryptocurrencies.

Lastly, ICO issuers will have to bear in mind the Singapore GST implications when embarking on their ICOs. A company will be liable to register for compulsory GST registration when its annual taxable turnover exceeds US$ 1 million. As the supply of cryptocurrencies is defined as a supply of services for GST purposes, an ICO issuer who has raised ICO proceeds in excess of US$ 1 million will potentially be liable for compulsory registration in Singapore unless exemption is granted by the IRAS.


Despite the current uncertain backdrop concerning the accounting and tax legislations applicable to ICOs, it is still worthwhile for blockchain companies to consider Singapore as the location to launch their ICOs as the Singapore financial regulatory has spelt out clear rules on what is regulated and what is not permitted. Nonetheless, it is also crucial for companies who are embarking on ICO projects to obtain advice from legal and tax specialists to minimise tax efficiencies prior to the commencement of their new endeavours.


Hermione Choong, Tax Manager
Nexia TS Tax Services Pte Ltd, Singapore

Edwin Leow, Director – Head of Tax
Nexia TS Tax Services Pte Ltd, Singapore



 3. Under section 2(1) of the SFA, “capital market products” means any securities, futures contracts, contracts or arrangements for the purposes of foreign exchange trading, contracts or arrangements for the purposes of leveraged foreign exchange trading, and such other products as MAS may prescribe as capital markets products.